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China eyes expatriate insurance fees

Foreign companies in China face significantly higher costs because of a new social insurance law that will apply to expatriate employees for the first time from July 1.

China’s first national social insurance law could require companies employing foreigners to pay up to Rmb4,324.56 ($667) per month in social insurance contributions, to pay for things like state medical insurance, pensions, workplace injury, unemployment and maternity insurance, according to employer lawyers.

Foreign employees might have to pay up to a further Rmb1,285.68 per month each in individual contributions.

Big areas of uncertainty remain, however, including whether the law will be voluntary or mandatory, and whether it will apply to all foreign workers – including those seconded from overseas – or only those working on local contracts. Treatment of nationals of Taiwan, Hong Kong and Macau is unclear.

Beijing has yet to indicate whether localities will have discretion to decide which foreigners are affected, or whether there will be a national standard, and whether expatriates who leave China can withdraw some benefits. Detailed regulations to implement the law are not expected for several months.

At a time when labour costs are rising rapidly in China, new social insurance levies on expatriate staff could further increase the cost of doing business in China. Income tax rates in cities like Shanghai – where the top levy is 45 per cent – are already seen as a disincentive to attracting foreign financial professionals.

The European Union Chamber of Commerce in China has urged China’s ministry of human resources and social security to make contributions for foreigners optional. The chamber has complained of a worsening environment for European business in China in recent years.

Lesli Ligorner, China employment law head at Paul, Hastings, Janofsky & Walker in Shanghai, says she believes expatriate inclusion will be mandatory. “It is going to affect labour costs significantly,” and could cause some employers to cancel costly medical insurance for their staff, she said.

“The law could potentially affect any foreigner with an employment permit and a certain minimum stay in China”, says Ralph Koppitz of law firm Taylor Wessing, Shanghai.

Jeffrey Wilson, counsel at JunHe Law Offices in Shanghai, who helped write a submission on the law on behalf of the American Chamber of Commerce in Shanghai, says he does not expect implementation in the short term. But most China-based employment attorneys expect that, in the longer term, inclusion of foreigners is inevitable.

One Response to China eyes expatriate insurance fees

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